More and more people are educating themselves about investment opportunities as they look for secondary income streams, and investing in property is considered one of the safest ways to invest your money. You may feel like property investment is a playground for the rich and famous, and in some cases, it is. But if you find yourself in a comfortable financial situation, renting out your current property and moving on to a new home or purchasing a buy-to-let property could be a great way to increase your net worth. However, this investment strategy may leave you slightly apprehensive about being a first-time landlord. If so, you’re in the right place. We’ve put together a few things to consider if you are about to embark on a journey as a new landlord.
Understand Laws and Insurance
First, you’ll need to get your head around the laws and regulations for landlords. This includes considering insurance options. You may jump to the conclusion that landlord insurance is a legal requirement, but this isn’t actually the case. However, it is recommended.
You’ll need to consider the different insurance options available to you as a landlord. Most landlord insurance will cover against things like fires and floods. They’ll also cover against damage to walls and flooring as these aren’t owned by the tenant.
You can add extra cover around things like unpaid rent and accidental damage. The insurance that you require will vary from landlord to landlord, so it’s worth exploring your options and seeking advice if need be.
Choose The Right Tenant
Life as a landlord will depend heavily on the tenant living in your property. A tenant who doesn’t take good care of your home will cost you both time and money. On the flip side, a good tenant will make your life a whole lot easier. Putting the right tenant in your home is dependent upon a thorough screening process.
Don’t feel guilty for being strict about who can live in your home – some landlords don’t allow pets while you should also be concerned with any potential tenants’ ability to pay rent on time. When deciding on the right tenant, be aware that it’s illegal to reject a tenant without a valid reason.
Budget Carefully
As a first-time landlord, you’ll be stepping into the unknown so the more you can prepare yourself the better. One way you can do this is by creating a thorough financial plan for the years that lie ahead. This can help you make decisions about what type of property you should be investing in and even if becoming a landlord is a viable option for you.
First, you’ll need to consider upfront costs. This includes the cost of purchasing a property if you’re buying to let. Consider what deposit will be needed as well as stamp duty and renovation costs. You’ll also need to consider solicitor fees and any other legal fees that come with buying a new property.
Your upfront costs will help you determine if property investment is an affordable option for you. But it’s also imperative to note that the costs don’t stop here. Maintaining the property is also important as this could save you costs in the long run and also ensure you keep tenants happy.
In terms of maintenance, you should have an emergency fund for things like sudden boiler repairs or leaky roofs. You’ll also need to decide if you’re offering a furnished property, unfurnished property or part-furnished property. A furnished rental property will allow you to charge higher rent but comes with the added cost of replacing items such as cushion covers and rugs.
Consider a Property Manager
A property manager can be a great help for first-time landlords as they’ll take care of many of the tasks mentioned above. Tasks that a property manager will be responsible for include, but are not limited to:
- Tenant Screening
- Property Maintenance
- Rent Collection
- Property Marketing
In terms of cost, property managers generally take a percentage of monthly rent as a fee. It’s common for this to be between 5 and 15 percent although it can be as high as 25%. You can decide which tasks you want to handle yourself and which you would want a property manager to take care of.
The answer to whether you need a property manager is quite simple: it depends. It depends on you, your situation and your budget. If you’re a first-time landlord, you stand to benefit the most from a property manager as they can bring the experience that you don’t have. On the other hand, you may also be working to a tight budget and a property manager may not be a luxury that you can afford.
The best option is to ask around for quotes before creating two budgets – a budget with a property manager and one without. This should first help you determine if you can afford a property manager before sitting down to consider if you need a property manager.
